Matt Simpson, CFTe, MSTA
CityIndex
Following the break of the bullish trendline and resistance levels below 0.940 my bias for an eventual run down to 0.9308 before resumption of gains
At time of writing we are oscillating around the 50 period eMA on the 4hr chart and on track to close marginally above the consolidation range. There is the possibility we have seen an 'A-B-C' correction and for the uptrend to resume, but my bias for a deeper bearish pullback are as follows.
- Citi Group FX Flows suggested there was more selling than buying leading up to the top
- Volume was declining near the recent highs and we have seen a slight increase on volume during the recent decline
- Shooting Star Doji and Hanging Man Reversal Candles formed at the highs,, below 0.945 resistance
- A new bearish channel also coincides around the resistance confluence around 0.940, making a price reaction likely if we reach these levels
So whilst I am favouring a decline down to 0.9380 do not lose sight of the fact that 'Large Specs' (according to COTS) are now positive for the 1st time since May 2013, which favours continued gains over the medium-term and a possible run up to 0.950-55.
But due to recent price action and volume activity the near-term favours a deeper pullback prior to the trend resumption. Below 0.930 will require a fresh assessment.
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